Almost three decades ago, Australia’s regulator won a landmark market-manipulation case against Nomura over a high-stakes index-arbitrage play that weaponised aggressive cash-equity selling to benefit a short index-futures book into expiry. The Federal Court held that Nomura’s trading created a false or misleading appearance in prices — a civil manipulation breach that became a touchstone for expiry-day misconduct worldwide.
According to court records and contemporaneous reports, Nomura ran a classic “index basket vs. index futures” strategy. On futures expiry, it carried a large short futures position against a long cash basket worth roughly the hundreds of millions, then instructed brokers to dump the basket in the final stretch, pushing the benchmark lower and juicing the short futures. The court found the aim wasn’t efficient execution but engineered price impact — the very definition of a misleading market signal. Orders “calculated to create a false or misleading appearance” were central to the ruling.
Fast-forward to India in 2025. SEBI’s explosive interim order against Jane Street alleged a scheme that distorted Nifty/Bank Nifty levels — again, with expiry-day behaviour squarely in focus. The order barred Jane Street, froze funds pegged around ₹4,800–4,850 crore (≈$565–$570 million), and accused the firm of unlawful gains, catapulting the case into one of India’s biggest market-abuse actions against a foreign prop trader. Jane Street denies wrongdoing and has challenged the order, but the shockwaves have already transformed India’s derivatives rulebook and volumes.
What Australia decided — and why it matters now
Deceptive conduct standard: Australia’s court said you can’t hide behind “legitimate” arbitrage if your goal is price impact. A price-insensitive dump that depresses the index to pay off a short futures leg is not bona-fide supply and demand.
Expiry-minute playbooks under the lens: The ruling centred on last-minutes trading that drove the benchmark — a precursor to today’s scrutiny of index closes and option settlement windows.
India’s Jane Street crackdown — how close is the parallel?
Expiry risk focus: SEBI zeroed in on patterns around expiries and “misleading prices” that hurt retail investors — thematically akin to Australia’s concern with forced price prints into settlement.
Enforcement arc: SEBI swung hard in July 2025 with a 100+-page interim order; Jane Street has appealed. Meanwhile, the regulator/exchanges tightened intraday monitoring and position-snapshot rules, especially for expiry windows.
Market impact: F&O volumes slumped after the ban — a sign that SEBI’s move hit a pivotal flow provider and underlined systemic stakes.
The core question
Australia already proved — in court — that “price-insensitive” dumping to tilt the futures P&L can be manipulative. India has fired an aggressive opening salvo through an interim order. The question is whether SEBI (and the Securities Appellate Tribunal/courts) will convert that into a final, judicially affirmed finding, as Australia did with Nomura — and set a durable precedent for expiry-day games.
Why this case could define India’s next market-abuse frontier
Precedent power: A final order upheld on appeal would align India’s jurisprudence with Australia’s — that intentional price impact to benefit related positions breaches market-integrity norms, even if framed as “arbitrage."
Rulemaking is already shifting: Post-order, SEBI and exchanges introduced tighter intraday position caps and random snapshots, with special attention to 14:45–15:30 — the sensitive settlement zone.
Global signal: Australia’s Nomura judgment became a global teaching case. An India Jane Street judgment would echo across HFT/quant playbooks that lean on end-session microstructure.
Bottom line
Australia showed that expiry-day “basket-vs-futures” shoves can cross from clever to criminal (or at least civil-offence territory) when price impact is the point. India has taken the first big swing at a modern analogue. Whether New Delhi ultimately lands a Nomura-style conviction will depend on how convincingly SEBI can demonstrate designed price impact — not merely aggressive but lawful execution — and whether appellate scrutiny holds. If it does, India won’t just “do the same” as Australia; it will set the 2020s template for policing index closes in the world’s busiest options market.
Sources: Australian Federal Court/ASIC materials and legal commentary on Australian Securities Commission v. Nomura (1998–99); SEBI interim order and subsequent coverage and rule updates regarding Jane Street (2025). |
